Scenario: Congratulations! You are now the new Chief Financial Officer for CannaBud a Standard Processor that just last week (November 7, 2020) received its Sales Amendment from Health Canada. Over the last three years CannaBud has been a leader in extraction and related services to a variety of large and small LPs including bottling of oils for labeling and sale by client companies. Unfortunately, the company has been limited by not yet having a sales license but now received, the company intends to expand into producing topicals and gelcaps and you have already ordered the additional equipment required which is expected to arrive the first week of January. The CEO and you have just spent a day with your Senior Management Team to discuss plans for next year and it is your job to build a Profit & Loss Statement and a Balance Sheet for the next fiscal year ending December 31, 2021. Fortunately, you have projections for the remaining six weeks of this year and a projected balance sheet as of the same date that you can work from. Based on the projections SMT agreed on listed below and the additional assumptions in the excel spreadsheet provided, complete a projected Profit & Loss and Balance Sheet

Cannabis Budget Assignment Questions Marking: 100% 1. P&L and Balance Sheet Creation: 40% - All projections above and spreadsheet assumptions are captured. - There is some flexibility in the Balance Sheet (ie: is profit/retained earnings reflected in excess/reduced cash increased/reduced debt etc.) 2. Questions: 35% - The answers should correspond to the financial model. - Answers should provide necessary assumptions (if any). - Observations should be included with answers (ie business lines that are more or less profitable etc.). 3. Business Review and Analysis 25% (500 words max) - A clear well-articulated and compelling review of the business including risks and notable changes and trends in the business year/year. - I note that the information should provide insight into a real business with strengths, weaknesses, opportunities and threats. Section 1 P&L and Balance Sheet Creation. Section 2 Questions (35%): 1. Revenue (5) i. What is the most profitable business line based on gross margin? ii. What is the most profitable business line based on gross profit? iii. How should these measures be considered when the company is looking at investment to increase profitability? iv. Are there other considerations then increased profitability to consider? 2. Cost of Good Sold (5) i. In comparing the margin and profit of branded vs contract manufacturing, should the company look to focus on one business line over the other long-term or are there financial and business advantages to having both? ii. How could that change in the long-term? iii. In looking at consulting and product development margins, what does that likely tell you and what questions should the company ask? iv. Looking at Processing Margins and Gross Profit, what are your thoughts on the business line? 3. Expenses (5) i. Looking at the Rent, how large is the facility and what is the revenue per square foot in 2020 and 2021 projected to be? ii. What questions might the company need to understand based on the previous question? iii. If the employment market started to improve in the industry due to increased demand and company had to increase salaries by 10% beyond current projections, what would the impact be on expenses? iv. Do you think that Other Costs reducing as a percentage of revenue is likely to continue, why or why not and what might impact revenue-based efficiencies? 4. Balance Sheet (20) i. Review the guidance on options for acquisition of equipment. Should company purchase gelcap equipment, yes or no and why? ii. Reviewing the same guidance, determine your decision of acquisition of equipment and indicate your decision on buy for cash, finance or lease and explain the advantages/benefits and disadvantage/risks to your choices? iii. Many of the Balance Sheet categories are determined by the business drivers (ie receivables and inventory levels). However, in some cases, management has discretion over whether to allocate profit to retained earnings (and increase cash), provide dividends to shareholders or reduce debt. What are the areas in this Balance Sheet subject to this type of decision-making based on the projected results as at December 2021 and what considerations should be taken into account when determining these discretionary allocations? Section 3 - Business Review (25%) Cannabud is a growing business. As the CFO, you are responsible for providing advice to the CEO and Board of Directors. You are free to structure your review as you like. I would suggest that you consider the following: Review of Growth/Progress in Financial Results from 2020 to 2021 (Projected). Likely risks and opportunities if assumptions are incorrect? Current Business Lines Demonstrated growth and sustainability as well as risks related to potential competition, margins etc. and what the company might be able to do to reduce risk if company does not achieve revenues or should company overperform in any/all areas? The financial information provides significant business information and is an invaluable tool for decision-making. However, it is not sufficient to make decisions without additional information. What additional information do you feel that you need related to some or all of the following in order to improve the companys ability to plan related to the following: a. Market information b. Competitor information c. Regulatory information d. Labour/staffing information e. Premises information f. Current Cannabud business information g. Access to financing/capital h. Other

Income Statement Product Development Cannabis Processing Services Manufacturing - CannaBud Products Manufacturing - Client Products Consulting/Other Projections as at Nov. 15/20 Dec 31/19 Dec 31/20 Dec 31/21 6,451 66,000 292,000 2,476,051 2,500,000 2,700,000 161,000 2,280,000 180 000 2,520,000 74,559 58,000 20,000 2,557,061 2,965,000 Revenue WWG 7,812,000 Year Buchachoume Namen Austin-5w 1($MM) 2 ($MM) 3 ($MM) 4($MM) 0 0 O 0 5($MM) 0 Net Income 2,611 1,898,041 81,000 1,717,500 Product Development Cannabis Processing Services Manufacturing-CannaBud Products Manufacturing - Client Products Consulting/Other Other COGS COGS Margit 13,980 1,145,000 84,000 69,500 12,000 18,986 1,919,638 752 1,324,480 1,798,500 Rent Utilities Equipment Maintenance Salaried Staff Amortization/Depreciation Interest Other (Marketing, Legal and Admin) 87,910 42,019 11,998 596,101 126,611 42,186 225,000 118,000 56,000 84,000 825,000 189,000 60,000 303,000 (494,402) 5,520 6,013,500 Operating Income Goeraviny/Karwin Taxes 25%. 25% 25% Net Income EBITDA CannaBud Ino. Balance Sheet Summary Projection as at Nov. 15/20 December 31, 2020 December 31, 2021 Assets Current Assets Cash and cash equivalents Accounts receivable (AIR) Inventory Total Current Assets Non-current Assets Property, plant and equipment: Total Non-current Assets Total Assets $259,000 $195,000 $271,000 $725,000 $1,250,000 $1,250,000 $1,975,000 $431,000 $200,000 $631,000 Liabilities Current Liabilities: Accounts Payable Current Debt Total Current Liabilities Non-current liabilities: Long-term Debt (Bank Loan) Total Non-Current Liabilities Total Liabilities Equity Retained Earnings Total Owner's Equity Total Liabilities and Equity $600,000 $600,000 $1,231,000 $1,320,000 -$576,000 $744,000 $1,975,000 Income Statement Product Development Cannabis Processing Services Manufacturing - CannaBud Products Manufacturing - Client Products Consulting/Other Projections as at Nov. 15/20 Dec 31/19 Dec 31/20 Dec 31/21 6,451 66,000 292,000 2,476,051 2,500,000 2,700,000 161,000 2,280,000 180 000 2,520,000 74,559 58,000 20,000 2,557,061 2,965,000 Revenue WWG 7,812,000 Year Buchachoume Namen Austin-5w 1($MM) 2 ($MM) 3 ($MM) 4($MM) 0 0 O 0 5($MM) 0 Net Income 2,611 1,898,041 81,000 1,717,500 Product Development Cannabis Processing Services Manufacturing-CannaBud Products Manufacturing - Client Products Consulting/Other Other COGS COGS Margit 13,980 1,145,000 84,000 69,500 12,000 18,986 1,919,638 752 1,324,480 1,798,500 Rent Utilities Equipment Maintenance Salaried Staff Amortization/Depreciation Interest Other (Marketing, Legal and Admin) 87,910 42,019 11,998 596,101 126,611 42,186 225,000 118,000 56,000 84,000 825,000 189,000 60,000 303,000 (494,402) 5,520 6,013,500 Operating Income Goeraviny/Karwin Taxes 25%. 25% 25% Net Income EBITDA CannaBud Ino. Balance Sheet Summary Projection as at Nov. 15/20 December 31, 2020 December 31, 2021 Assets Current Assets Cash and cash equivalents Accounts receivable (AIR) Inventory Total Current Assets Non-current Assets Property, plant and equipment: Total Non-current Assets Total Assets $259,000 $195,000 $271,000 $725,000 $1,250,000 $1,250,000 $1,975,000 $431,000 $200,000 $631,000 Liabilities Current Liabilities: Accounts Payable Current Debt Total Current Liabilities Non-current liabilities: Long-term Debt (Bank Loan) Total Non-Current Liabilities Total Liabilities Equity Retained Earnings Total Owner's Equity Total Liabilities and Equity $600,000 $600,000 $1,231,000 $1,320,000 -$576,000 $744,000 $1,975,000